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Annulation of the municipality decree provisions on air passenger tax by the Curia

On 28 March 2023, the Curia established that certain provisions of the municipality decree of the 18th District of Budapest on local taxes are contrary to other legislation, and therefore annulled the provisions on air passenger tax with retroactive effect to 1 January 2023.

On 30 November 2022, the municipality of District 18 of Budapest created a municipality decree that introduced the air passenger tax. The tax obligation was based on the arrival, departure, transfer and transit journeys made by private individuals as civil aviation from the airport in the jurisdictional territory of the municipality concerned, provided that they are not subject to a statutory public tax and that the air travel is not used by the individual for business activity. The Decree stated that a tax of HUF 1,000 per person per air journey must be collected jointly by the ground-handling service provider and the passenger air carrier. In addition, these parties were required to keep a register of the subjects of the air passenger tax.

On 25 January 2023, the Capital Government Office claimed the Municipality Council of the Curia to establish that the provisions of the decree relating to the air passenger tax are contrary to other legislation and to annul of these provisions. The Curia imposed a provisional application prohibition on the concerned parts of the decree, as it needed more time to reach a final decision. The Curia examined the objections raised by the Capital Government Office and found them to be well-founded. Accordingly, the municipality did not fully comply with its obligation to carry out a prior assessment of multiple taxations, the regulation of the decree also raises data protection concerns and it does not regulate fundamental issues such as the method and due date of the tax liability, the way to tax exemption, rules for recording and documenting collected tax and tax exemptions and the rules for assessing tax in foreign currency.

The Curia found the Capital Government Office’s concerns well grounded, therefore, with retroactive effect to 1 January 2023, annulled the provisions on air passenger tax of the decree. In its decision, the Curia stated that a municipal decree that does not specify how the tax is to be paid, when it is due, how tax exemptions are to be evidenced, the rules for recording and proving the tax collected and the tax exemptions, and the rules for assessing the tax in foreign currency, violates the requirement of clarity and creates legal uncertainty for the recipients (taxpayers and those liable to collect the tax).